Put yourself in the compiler's position: when you forward declare a type, all the compiler knows is that this type exists; it knows nothing about its size, members, or methods. This is why it's called an incomplete type. Therefore, you cannot use the type to declare a member, or a base class, since the compiler would need to know the layout of the type.

Assuming the following forward declaration.

class X;

Here's what you can and cannot do.

What you can do with an incomplete type:

Declare a member to be a pointer or a reference to the incomplete type:

class Foo {
X *pt;
X &pt;
};

Declare functions or methods which accept/return incomplete types:

void f1(X);
X f2();

Define functions or methods which accept/return pointers/references to the incomplete type (but without using its members):

void f3(X*, X&) {}
X& f4() {}
X* f5() {}

What you cannot do with an incomplete type:

Use it as a base class

class Foo : X {} // compiler error!

Use it to declare a member:

class Foo {
X m; // compiler error!
};

Define functions or methods using this type

void f1(X x) {} // compiler error!
X f2() {} // compiler error!

Use its methods or fields, in fact trying to dereference a variable with incomplete type

When it comes to templates, there is no absolute rule: whether you can use an incomplete type as a template parameter is dependent on the way the type is used in the template.

For instance, std::vector<T> requires its parameter to be a complete type, while boost::container::vector<T> does not. Sometimes, a complete type is required only if you use certain member functions; this is the case for std::unique_ptr<T>, for example.

A well-documented template should indicate in its documentation all the requirements of its parameters, including whether they need to be complete types or not.